TAVA POST #3 - Investor relations chimes in!!!
The mysterious AOL Tavazoid sends back this reply:
No I'm not going to speculate - don't have to. Here is the companies (Investor Relations) official word on the loan you reference. Geez Bill if this is the best (negative) you have on TAVA stop being so lazy and do some real DD.
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From: Scott Liolios; TAVA Investor Relations
Thank you for the heads up on the SI thread. I have received several
emails regarding the Tandem loan, and although I do not believe some
individuals in the thread deserve to be addressed, I am sensitive to the investor concerns. Therefore, I will try to clear the air on the Tandem Loan and other issues.
First, many have asked for the total TAVA head count. At the end of
March, TAVA had 387 employees (263 technical). At the end of April, they had 397 (272 Technical). At the end of May, the company had 440 (306 Technical). And from 6/1/98 to 6/15/98 TAVA hired an additional 33 people to bring the total head count to 473 people. As you can see, they are well on there way to reaching head count goals.
As far as the Tandem loan let me clarify:
1) Prior closing the Tandem Loan, TAVA had all its assets pledged to various bank facilities as well as the Renaissance debentures.
Closing the Tandem loan, allowed the company to pay off all short term
debt, (important for administration consolidation efforts), improve
the working capital position, (by moving short term debt to long term)
and raise additional cash proceeds of approximately $2 million. Since
all the company's assets were pledged to other debt, the company
accomplished the above without giving up any "new collateral"; i.e. all the company's assets were already pledged. Further, the TANDEM loan does not have any principal payments required for three years and has limited debt covenants.
2) Lending institutions don't lend money based on market cap. or
collateral value ( a common misperception). Traditional bank lenders
look at historical earnings and cash flow to support bank credit.
Due to TAVA's roll out of its Plant Y2K One software, the banks wanted to see several quarters of earnings prior to extending credit. The company continues to have discussions with banks about replacing TANDEM with a more traditional bank facility.
3) The Tandem loan does not have any prepayment penalties. We can
repay the debt at any time which extinguishes their collateral position
4) Tandem was interested in extending the company additional
credit. TAVA was not interested since Tandems fees were based on the size of the facility. Tandem remains interested in lending TAVA additional funds.
5) At 3/31/98, TAVA was in violation of the covenants on the
Renaissance Debenture, not the Tandem loan. The covenant violated was
the Times Interest Earned ratio, which is a ratio designed to measure
earnings to interest expense. TAVA was in violation of the covenant due to losses. These covenants were set when the Renaissance Debenture was closed, in 1996.
Finally, the company is looking at the Tandem loan as a debt facility
which:
1) Is possible to increase,
2) Provides time to prove the Y2K Product viability through earnings and thus will allow the company to arrange traditional bank financing,
3) provided consolidation of existing debt on favorable terms (i.e. principal payments ) and less restrictive covenants and
4) Provided net new funds of approximately $2million.
TAVA obtained the above benefits without changing the collateral position of the lenders.
Closing of the Tandem loan was hardly a "desperation" loan. Closing this loan was a part of well developed plan to continue to increase the financial strength and balance sheet of TAVA through an appropriate balance of equity and properly structure debt financing.
I hope this will clarify the transaction and illustrate you should
challenge some of the people who misinform the SI board.
As far as Emerald Research is concerned, I met with the analyst for
approximately 3 hours last monday. If they are dropping coverage it would be complete shock to me.
I hope all this helps.
J. Scott Liolios
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